H. R. 2317

Recently I sent a letter to my Congressperson Mark Green - R, WI about an important issue affecting the banking industry, in which I work.

July 23, 2005

Dear Mark Green,

The following is a standardized letter voicing my opposition to H.R. 2317. However, I would like to add a few additional items. First off, to put this letter more succinctly, if credit unions desire to do more lending in the commercial sector, let them become commercial institutions. If they are big enough to function like a commercial bank, then they can afford to pay taxes just like everyone else. This is not a matter of tax relief, it is a matter equity. It is wholly unfair to everyone when an institution reaches to grab a greater share of the market and then pays nothing back to the structure that made that growth possible in the first place. Increasing the commercial lending capacity of credit unions, positions us to have institutions that are veritable leaches of the system.

Second, I am a banker at a medium sized community bank. We are in fact about the size of many of the below listed credit unions. It is Baylake Bank's specific goal to enrich and empower the communities in which we live and work. This fundamental goodness of an institution such as my employer is not characteristic of many of the large national banks. Our community for profit intuitions will inevitably struggle, suffer, and potentially collapse if they have to compete with an institution that does not bear the burden of taxes. If such a phenomenon should happen as a community bank closing, the customer would be left with only 2 alternatives. 1) Large national banks whose sole purpose for existence is bottom line profit. These institutions rarely do what is best for the customer in the long run. 2) Credit Unions who enjoy all of the benefits of operating as commercial bank without giving back any of the revenue that they generate. The institution for which I work is the best mix of these two extreme. A medium sized community bank can still provide all of the full service of large bank at a competitive rate, as well as the service and community focus of a credit union.

Lastly, as we all understand, Credit unions were chartered for those of modest means. This is a particularly important point and has strong repercussions for the financial industry. Credit unions focus should be on those customers and situations where lending the lending risk is greater. Many of the customers who bank with a credit union do so because they are able to obtain a loan they would not otherwise qualify for. It is credit unions not for profit status that allows them to take on these additional risks. The question remains to be answered as to whether or not credit unions will continue to lend to these needs or if predatory lenders will usurp these needs. There is a rise of predatory lenders in every community in our state. They are a fundamental danger to our way of life in America. Credit unions and small community institutions are in the best position to combat these businesses. However, I feel very strongly that change in the structure of lending at credit unions will adversely affect this very important issue.

As a member of the Wisconsin Bankers Association, I am asking that you oppose H.R. 2317, the Credit Union Regulatory Improvements Act of 2005.

Today, there are more than 100 credit unions with more than $1 billion in assets across this country. In Wisconsin, Landmark Credit Union in New Berlin, has $935 million in assets, the UW Credit Union in Madison has $760 million in assets, and the Community First Credit Union in Appleton has $675 million in assets. These are big institutions, many of which offer a full range of financial products. It is extremely difficult for community banks to compete with these giant tax-exempt credit unions. Disguised as a regulatory relief bill, H.R. 2317 increases credit unions’ business lending authority from the current cap of 12.25 percent to 20 percent of total assets. The bill also excludes all business loans of less than $100,000 from the cap, up from the current $50,000 cap.

Credit unions were chartered to serve individuals of modest means – not to make commercial loans. This major expansion of business lending authority would benefit only the largest, most aggressive credit unions, while putting both smaller credit unions and tax-paying financial institutions at a greater competitive disadvantage.

In addition, H.R. 2317 would change the definition of “net worth ratio” for the purpose of determining required minimum capital levels for credit unions. This minimum capital system was developed by Congress to ensure that adequate funds are available as a cushion against unforeseen losses. The bill would change the definition of net worth ratio in a way that would artificially inflate the capital cushion, thus reducing the actual funds available to protect depositors and taxpayers if credit unions were to experience financial difficulty.

I hope you will take my views into consideration and oppose H.R. 2317.

Sincerely,

(Last Man Out)